There is speculation inside the corridors of Victoria’s largest power generator that it could be forced to a sale as a result of the nuclear disaster in Japan.

It is a little known fact that Victoria’s largest power generator, Loy Yang A power station, is part-owned by the Tokyo Electric Power Company, the same company at the heart of the nuclear catastrophe in Japan. TEPCO has owned 32.5% of the Loy Yang A station and the massive open-cut coal mine adjacent to it in Gippsland’s Latrobe Valley since 2004.

However, TEPCO owes billions of dollars in compensation following the earthquake, tsunami and subsequent meltdown at its Fukushima plant in March. It’s prompted concerns inside Loy Yang that TEPCO may need to sell down some of its international assets to recoup the funds it needs to pay compensation at home.

Crikey understands this has been discussed by senior management at Loy Yang but that no notification has been received from TEPCO at this stage.

There is concern among workers at the Latrobe Valley plant that the company could be forced to a fire sale at the worst possible time. Loy Yang is struggling with massive debts and has recently ordered a management restructure and voluntary redundancies to cut costs.

One insider told Crikey the company has “just gone through senior management like a dose of salts because the place is broke”.

Meanwhile, Loy Yang’s other shareholders, AGL and Transfield, have indicated they are keen to get out of Loy Yang. Transfield has signalled it is keen to sell to an overseas investor and AGL has announced that Loy Yang is returning lower-than-expected revenue.

AGL was barred by the ACCC from taking an active role in the company when it entered the consortium to buy Loy Yang in 2004. As a result TEPCO has a strong say on the future of the plant. TEPCO owns 48% of the Loy Yang Marketing Management Company, the body that acts as an agent for the generator.

The respective parties own Loy Yang through a consortium called the Great Energy Alliance Corporation. Company sources would not reveal whether TEPCO can sell down its assets or whether it is bound to stay within the alliance for a set period. One observer who spoke to Crikey said that it is a reasonable question to ask whether a sale is inevitable.

Loy Yang A is a 2200 mw power plant and produces a third of Victoria’s electricity.